All Forum Posts by: Andrew Whicker

just know that I haven't bought a property yet

This is the same thing I'm running into, finding out what I want my goals to be.

It's easy to be inconsistent, as different investors do different things.  Some build up cash reserves with 0% cashflow for a while and then cashflow 100% until an expense comes up. 

This site seems to keep it simple:  Every expense is made every month, the % cashflow stays the same every month.  

Anyway, after looking around and talking to people I've come up with $100 / door min. + 15% CoC min. Interested to see what other people say. It seems with my calc's, that's $65k max with $16k max to spend (including down payment / closing cost / repair / inspection / etc) before it gets 100% occupied assuming tenants pay 100% utilities, you set aside 15% maintenance per month and 5.25% interest. (1.5% rent / purchase ratio, $280 / month cashflow).

Don't take my word for it though, I'm putting in offers for my first still.  I'm pulling my hair out, so I'm curious what seasoned investors tell you.

BTW, here are the final numbers that reflect the rental:

- Tenants paying 100% water, trash, etc

- Me paying lawncare and snow removal

- No property management fee included

Revenue:

$1350

Cost:

$1173

Cashflow:

$177

@Aaron Montague 

@William Hochstedler 

I rescinded.

Thanks for all the help.  It's just aggravating to keep making mistakes when getting these properties under contract.  Learning a lot though.  Also learning who to talk to and what to expect.  

I'm constantly trying to make more offer more realistic from the very beginning.  

Arrgh, I'm just aggravated right now because I thought this was a solid go when that price was accepted. If the price was 100k, then the PITI would be about $50 less. I guess at what point would this particular deal be considered 'good'?

Thanks,

@William Hochstedler 

- Vast majority of the repairs is new paint / flooring.  Both kitchens need to be updated and the bathroom needs to be updated downstairs.

- Up and Down.  I really had the estimated rents at 700 up and 650 down.

- Vacant.  This is a Fannie Mae property

- Parking is adequate, this is a properly zoned property.

- Don't have costs for lawn care and snow removal.

- See above.  Fannie Mae property.

- PITI: Mortgage: $541, PMI: $123, Taxes: $92, Insurance (worst of 3 quotes): $54

- Future re-fi costs ~$1500 (conservative) when staying with the same broker

- Had an investor friend walk through with me and gave me some good advice on when to replace windows

- Central heat, but no central air conditioning.  Actually, no air conditioning.  The 140k comps also tend to have central AC.  Another upgrade that I've costed out yet.

Thanks for the follow-up.  I agree that the numbers are thin.  I just feel like I've been looking for a while.  I'll keep looking...

Cheers,

I'm not really trying to.  I talked to a property manager and a PM would pass the water bill onto the tenants.  That changes my numbers quite a bit.  

I also didn't include a property manager fee into the equation because I planned on doing my own management.  Do most people keep this in to plan for the future of management?  That would make sense.

One of the big problems I have is the PMI. It's $125 / month. I guess that brings up a big question: can I re-fi when interest rates are low enough that I remove the majority of that $125 / month? How much will my house renovation work bring up the appraisal value? Right now, at $170 / month cashflow I don't have enough to pay someone to manage the property.

I don't feel there is a risk of not getting $1350 / month, but a risk of not getting $1500 / month.

Also, the comps show that most 'turnkey' duplexes in the area go for ~140k with ~$1300 / month in rent. That would allow me to argue for the appraisal value I need in order to re-fi and remove the PMI once the house is rented.

Anyway, I hope that helps and, no, I'm not trying to get the numbers work.  I'm trying to make sure I see the potential / lack of potential for what it is.  I don't want to turn this house down because I saw it in the wrong light.  

No thoughts?  I've gone back and forth with this one.  I think that the house could rent for more than $675 as some of the rentals nearby seem to be going for $700 at the minimum.  I am being conservative with my numbers.

@William Hochstedler 

@Aaron Montague 

Thanks for the reply,

Good call on the weather.  A one car garage is about 18k and a two car is about 25k (one big garage door).  Completely unfinished, no electric.

And yeah, I wasn't going to worry too much about the extra income, I was mainly concerned with the additional appraisal value.  I've been told you can expect about $5k of equity for every bay here.  

And like others here have said, I hear the tenants stay longer and the houses stay empty for a shorter time with a garage.  In other words, hard things to quantify, but there are benefits.  $25k worth of benefits?  Hard to say it seems.

Also, after having a discussion with an appraiser, I understand there is an obvious difference in how one would appraise a duplex vs a single family home.  It makes sense that my appraisal will have a lot to do with income.  So maybe a garage won't add as much benefit as it seems since the extra income would be small.

Hmmm

Here is a summary of changes (water partially paid by tenant):

Overall:

Duplex (year: 1958)

Contract Price: $110,000

2,000 Sq Ft Total

3 bed / 1 bath each

House is Vacant (Fannie Mae)

Monthly Costs:

Mortgage, FHA (PITI): $810

Repairs: .15*1350 = $202.50

Trash / Water (avg): $55**

Vacancy: $108

**After billing tenants flat rate of $50 each.  Water bill high in summer due to watering lawn.

Monthly Revenue:

Rent: $1350

Monthly Profit:

Cashflow: $172

One time costs:

Closing costs: $3,850

Inspection: $500

3 Month Vacancy: $3,534 

Rehab: $6000

CoC: 15%

Cap Rate: 10%

Thoughts?

PS: Still a chance to reduce water costs by landscaping and reduce mortgage payment by re-financing and getting rid of PMI.